BUDGET PLANNING AND DSS SYSTEM
FOR PIEROGI_RUS.COM
Assignment 1 – Group C
June 15, 2010
Kristina Marie Crosson
Mandy Hess
Lynette Lindy
Courtney Walters
Model -3 (see graded model)
#1, #3, #4
#5 -1
#6 -1
53/60
-2
Executive Report
Pierogis are a Polish-American specialty dumpling, for which Pierogi_rus.com is most
well known. Founded in Warsaw, Poland, the company is currently based in New York, run by
Mr. Polanki, son of the company’s founder. Pierogi_rus.com had been very successful since its
United States debut in 1982, however due to the economic downturn over the past few years the
company has had declining sales. Mr. Polanki, CEO and President, called his executive staff
together in an effort to formulate a strategy for the company to combat declining sales, and
finally came to the consensus of hiring a group of experts to analyze the current situation and
develop recommendations for Pierogi_rus.com. Using this strategy, the company hopes to
improve their bottom line and maintain a stronghold in the market.
The following report analyzes alternatives for Pierogi_rus.com to pursue, not only
internally, but also taking acquisition into consideration. Short-term and long-term issues are
reviewed, which Pierogi_rus.com must evaluate and consider the various alternatives presented.
The company must also think about maintaining the satisfaction of its shareholders with their
investments in Pierogi_rus.com, and make sure those investors remain satisfied with the
company’s performance and numbers. Finally, Pierogi_rus.com must consider the leverage that
GROUP C - ASSIGNMENT 1
Page 2
IT advancement will give the company, specifically cloud computing which is where internetbased sales and marketing is going.
(identify problems: Inventory carrying cost; constant production rate; maybe ineffective
advertising; provide a summary of recommendations)
GROUP C - ASSIGNMENT 1
Page 3
Alternative Impacts
As the economy worsens, Mr. Polanki, CEO of Pierogi_rus.com, is looking for
alternatives. One of the alternatives that Mr. Polanki must take into consideration is what would
happen to his profits if prices go up by twenty percent and demand goes down by twenty percent.
When this happens, gross sales decline and the net profit declines at a rate higher than twenty
percent.
Mr. Polanki and Pierogi_rus.com wishes to obtain a fifteen percent rate of return in
December of 2011. The variables that should be adjusted in order to attain this goal are typically
adjust price and/or production due to lagging demand and inventory build up
advertising and promotion costs. The best form of advertising is word of mouth, which is
also the most inexpensive form of advertising. It is human nature for consumers to trust the
instincts and advice of those they know, so Polanki and his staff must make an effort to keep
customers loyal in order to spread the positive message about their Pierogis, who will then
encourage friends and relatives to begin purchasing the product. One other way that Mr. Polanki
can obtain his desired rate of return is to cut back on staff (is this ethical???)and ensure that
his employees are utilizing their time at work to the fullest capacity; this will lower the labor
costs for the company and inevitably reach a more desirable rate of return.
No additional analysis!!!
Factors to Consider
If Foods_rUS.com takes over Pierogi_rus.com, Pierogi_rus should think about the fact
that the Polanki family will loose control over company, and most likely the way the business is
GROUP C - ASSIGNMENT 1
Page 4
run. Foods_rUS may have a set way they operate a business, which may conflict with the way
the Polanki family does things. What will happen to all of Mr. Polankis’ employees? Will they
have to rework the structure of the organization? Will any of them be let go? As a positive, it
will take care of the issue with the unhappy shareholders. Depending on the direction
Foods_rUS decides to go with Pierogi_rus, the Pierogi product the Polanki family built such a
great image for, may loose its identity. Pierogi_rus would have to decide if they even want to
run the business anymore. Maybe the best thing for the Polanki’s would be to sell it and be done
with the company. What are the reasons for this?
Foods_rUS should consider the fact that they’re possibly taking over a company that is
projected to have declining sales by 5% a year for the next couple years. maybe there are food
“compatibility issues”
Does the company really want to acquire a company that may drag them down instead of boost
their profits? Also, Foods_rUS will need to decide if they’re going to take over operations of the
Pierogis, or if the Polanki’s company will continue to handle production. If Pierogi_rus
continues to run the Pierogi part of the operation, will they continue to use the same suppliers?
Or, will Pierogi_rus be required to use Foods_rUS suppliers and distributors? Does Pierogi_rus
have contracts with current vendors? That could cause problems if they need to try to break
contracts or have to deal with multiple suppliers. Foods_rUS may not like the prices Pierogi_rus
was paying for different items, but they may be locked into those prices.
Foods_rUS will also have to decide how they’ll sell the Pierogis. Will they continue to
see them on the Pierogi_rus website, so current customers will know where to go? Will they
only sell them on the Foods_rUS site? Will they sell on both sites? They’ll have to decide
GROUP C - ASSIGNMENT 1
Page 5
which way will be the most cost effective and make the most business sense. If they decide to
continue to use the Pierogi_rus website, who will run it? Foods_rUS or Pierogi_rus?
Both companies need to consider if Foods_rUS will be able to reach the Pierogi_rus
target market. Will consumers that like this traditional Polish dish, go searching for it on an
Italian company’s website? Another factor for the two companies to consider would be the fact
that Pierogi_rus is dealing with an International customer base. Is Foods_rUS doing the same?
If not, will they be able to handle a potential for language barriers, distribution, currency
exchange, etc? If Pierogi_rus stays involved after the takeover, who will be involved in
decision- making regarding the Pierogis? Will Mr. Polanki and his senior management team
have a voice in the company at all? How will the two companies combine or coordinate
information systems?
additional factors to consider
Legal concerns
Transborder data flow issues
political situation in countries
Immediate Short Term Issues
Short-term business strategies include obvious choices like slightly raising the price on
Pierogis, to attempt to stay above the $100,000 monthly profit before taxes. To be sure
inventory doesn’t fall below 500 units a month, the company should pay extra attention to their
transaction processing and/or enterprises systems.??? These systems will not only assist in
making sure the inventory count doesn’t fall below the desired level, but will also help to
GROUP C - ASSIGNMENT 1
Page 6
monitor if there are large amounts of inventory left over towards the end of the month. Having
too many units left over seems like it is more the problem in an economic downturn.
Mr. Polanki should use systems like SCM to see how many units are left in the middle
towards the end of the month that’s not the purpose of SCM!!!!, (between the 15th and 20th), and
start offering special promotions to get rid of extra units. There could be a special day for a
discount promotion, like 25% off on the 25th. They could have a “pre-holiday” special in the end
of May and June for US customers, for Memorial Day, 4th of July, and Labor Day. The company
could offer special promotions on Polish holidays, like the Restoration of Independence on
November 11th and the Passing of the Constitution on May 3rd. These two celebrations,
especially the day of Independence, are during non-peak times. This small effort could really
help to boost sales during those months.
Mr. Polanki should also implement other marketing campaigns for the slower months.
His marketing department should develop e-marketing campaigns that build brand awareness
and promote the Pierogi. One campaign could include sending out Polish recipes, another could
be more customized to each current or previous customer (i.e. “We Miss You at
Pierogi_rus.com!”). The great thing about marketing for this company is that it can be very cost
effective. Besides the time and money spent on the IT/design side of things, these email blasts,
are basically free!
IT can be used to immediately attempt to turn the situation around for Pierogi_rus.com in
a few different ways. They can update, monitor, and maintain the customer relationship
management system, so it’s running smoothly. The system will only be helpful to the company
if it’s working properly. The CRM system will be key for sending out promotional emails to
GROUP C - ASSIGNMENT 1
Page 7
customers. It’s also extremely important for making sure customers are satisfied for repeat
business.
IT can also be used to make sure the supply chain management system is running
properly????. This can prevent the company from wasting money on extra shipments from
suppliers or mishaps with distributors. Any mistakes can be costly for a company, and Mr.
Polanki doesn’t want to risk anything that could hurt the bottom line. The SCM system also
assists in making sure inventory levels are appropriate (must always be above 500 at the end of
the month), so IT can also really help here. Having an efficiently run system, will help to keep
other departments in the loop with levels of inventory left over, or how many need produced.
The closer they are to selling what is produced, the less money is wasted.
IT can also work to update the website. They could find ways to make it more userfriendly, and attractive to customers. They could add pages to the site that the customer may
find interesting, and will draw them back to the site more often. One page could be dedicated to
adding recipes to spice up the Pierogi or dishes to go with the Pierogi. Another page could have
a daily Polish recipe listed. IT just staying on top of the site and monitoring it for any glitches or
stopping issues before they happen, is really important for immediate advantage. If the site goes
down or there are problems with order processing on the site, Pierogi_rus could loose a lot of
money! The same goes for the company’s network or intranet system going down.
Long Term Issues
As global sales increase, Pierogi_rus should acquire a distribution company. Since sales
have been so high in the United States, they should purchase their first distribution company
there. If sales in Europe continue to grow to more than 10% of total profit, say once they reach
GROUP C - ASSIGNMENT 1
Page 8
around 30%, Mr. Polanki should consider acquiring a distribution company in Poland, good
point, however only for Europe, otherwise shipping costs and taxes may eliminate any
advantages!!!. Not only would Mr. Polanki obviously understand the business culture better in
the country, Western Poland would be a good central location for shipping all around Europe.
Owning a distribution company would really help to cut down on shipping and transportation
costs. Having a location in Europe would be especially cost effective. Mr. Polanki could also
consider using the distribution company they acquire to transport products for other companies,
(good point) as additional income.
Mr. Polanki should definitely plan for diversifying into other foods in the future. He
should stick with similar cultural foods, so they can continue to target the same niche market.
Pierogi_rus could sell traditional Polish foods like sausages, hams, Polish mustards, packaged
Polish soups or packets of seasonings with recipes for making soup, and packaged Polish
pastries. (good point…relate to market basket analysis) Offering these items could
really help to boost sales during seasonal Pierogi lulls. Since sales are lowest during the winter
months, November – March, Pierogi_rus could promote wintertime comfort foods. They could
push sales of soups and hams, when people are warming up at home, eating heartily. Springtime,
when Pierogi sales are begging to rise, would be great for promoting sausages. Mr. Polanki
could tie in baseball season to sausage sales.
Leveraging IT
The most influential analytical model for assessing the nature of competition in an
industry is Michael Porter's Five Forces Model. Porter explains that there are five forces that
determine industry attractiveness and long-run industry profitability. The five "competitive
GROUP C - ASSIGNMENT 1
Page 9
forces" are the threat of entry of new competitors (new entrants), the threat of substitutes, the
bargaining power of buyers, the bargaining power of suppliers, and the degree of rivalry between
existing competitors. The Porter’s Forces Model is used to identify whether new products,
services or businesses have the potential to be profitable. Pierogi_rus needs to invest in
upgrading their IT to assist them in making managerial decisions while using the Porter’s Five
Force Model and value chain. The upgraded system and Porter’s Five Force Model could be
used to decide whether or not to open their first distribution company in the United States and
the potential for one in Poland. There would have to be an assessment of how easy it is for
suppliers to drive up prices-supplier power. Then ask how easy it is for buyers to drive prices
down-buyer power. Buyer power will be reduced by suppliers and not by buyer’s
themselves!!! Next, Pierogo_rus will have to research on the number of competitors and the
competition’s capability-competitve rivalry. The threat of substitution needs to be checked to
see if there are companies offering similar products cheaper. Is it easy for new companies to
enter the market is another question that needs to be researched and answered. After all of these
questions have been researched and answered the company should open a distribution company
in the United States based on the findings. The same process will have to be followed to open a
distribution company in Poland.
The information value chain is a framework for determining how to leverage information
resources across an organization and its many third party and market connections (good point!!!).
In the information value chain efficiency results from the free flow of information. The degree
to which we are able to be seamlessly share, exchange, modify, and enhance this information
across employees, partners, suppliers, and customers. Information systems are part of a series of
value-adding activities for acquiring, transforming, and distributing information that managers
GROUP C - ASSIGNMENT 1
Page 10
can use to improve decision making, enhance organizational performance, and ultimately,
increase firm profitability.
Pierogi_rus.com needs to be willing to make changes in its business processes by using
IT to meet the challenges of the long term issues of the company. The company needs to look at
upgrading its IT system to acquire, transform, and distribute information to the managers to
improve decision making and potentially increase profitability. There needs to be a better
connection with its sales operation to receive information quickly. Long term Pierogi_rus could
use IT to share inventory and sales data with suppliers to be able to quickly restock to meet
customers’ demand. Also, IT could provide real time information for inventory and warehouse
management and financial activities to help managers make better decisions.
Cloud Computing
As a metaphor for the Internet, "the cloud" is a familiar cliché, but when combined with
"computing," the meaning gets bigger and more complex. Some analysts and vendors define
cloud computing narrowly as an updated version of utility computing: basically virtual servers
available over the Internet. Others go very broad, arguing anything you consume outside the
firewall is "in the cloud," including conventional outsourcing.
Cloud computing is a general term for anything that involves delivering hosted services
over the Internet. These services are broadly divided into three categories: Infrastructure-as-aService (IaaS), Platform-as-a-Service (PaaS) and Software-as-a-Service (SaaS). The name cloud
computing was inspired by the cloud symbol that's often used to represent the Internet in
flowcharts and diagrams. By eliminating the need to install and run the application on the
customer’s own computer, SaaS alleviates the customer’s burden of software maintenance,
ongoing operation, and support. Cloud computing focuses on a way to increase capacity or add
GROUP C - ASSIGNMENT 1
Page 11
capabilities on the fly without investing in new infrastructure, training new personnel, or
licensing new software. Cloud computing allows small companies to achieve high quality
solutions with less capital; minimizes on-going cost of traditional on-site applications; typically
is priced modestly; and sets stage for corporate innovation. There are advantages and
disadvantages to Cloud computing.
PROS of Pierogi_rus.com using Cloud Computing





Low start-up costs-Mr. Polanki (CEO) is not willing to commit to money, so the low cost
and high quality solutions of cloud computing maybe more attractive to Mr. Polanki.
Ease of management-No purchase of hardware or licensing upkeep.
Scalability-Expansion is easy to add users and locations at modest cost.
Device and location independence-Access cloud on desk top, someone else’s computer,
or other mobile device.
Rapid innovation-response to needs rapidly when new products or services are rolled out.
CONS of Pierogi_rus.com using Cloud Computing:







Stored data might be lost-If Piergo_rus.com does not back up information and the
information is lost this could be a serious problem to get orders out on time, make orders,
payroll, and other host of issues.
Security-Stored date might not be secured-Competitor could get Piergo_rus.com
customer and supplier information and sabotage their business.
If no internet connection you cannot work. (Cloud computing does not work offline)
The system may not have all the features required. Piergo_rus.com may have to run 2
systems at one time in the beginning to make sure Cloud Computing has all the features
required to meet the companies needs now and in the future.
Performance-The more users the slower the system-Piergo-rus.com may not be able to
quickly respond to customers, suppliers, or issues.
ROI-The return on investment may be good short term only.
Market Churn-The cloud vendor goes out of business all Piergo-rus.com information is
gone.
good
The key difference between network computing and cloud computing is the "cloud" itself. The
cloud is a large group of interconnected computers that typically extends beyond a single
company or enterprise. The applications and data served by the cloud are available to a broad
group of users using different operating system platforms; access is via the Internet. In short,
GROUP C - ASSIGNMENT 1
Page 12
cloud computing enables a shift from the computer to the user, from applications to tasks, and
from isolated data to data that can be accessed from anywhere and shared with anyone.
References for Cloud Computing:
http://en.wikipedia.org/wiki/Cloud_computinghttp://en.wikipedia.org/wiki/Cloud_computing
http://www.infoworld.com/d/cloud-computing/what-cloud-computing-really-means-031
http://www.wikinvest.com/concept/Cloud_Computing
http://www.informit.com/articles/article.aspx?p=1321170
GROUP C - ASSIGNMENT 1
Page 13